New Microloans Could Give Young Farmers the Capital They Need

Farmers are not a good investment risk. Their business requires substantial influxes of capital to erect barns, buy tractors, and plant seeds, with little guarantee of return. When a river floods or a heat wave hits, it can throw the best business plan off course. One of the best ways for farmers to borrow money is to ask the U.S. Department of Agriculture, which can provide hundreds of thousands of dollars in financing. (Unfortunately, there’s a huge amount of paperwork involved in these loan programs.)

But young and beginning farmers don’t need all that. Starting out, a farmer might need a few thousand to buy a truck, some tools, or a round of seed. Young farmers who want to start small, often organic farms have had trouble getting access to that kind of money. When the National Young Farmers Coalition asked beginning farmers last year to list the challenges they faced, lack of capital came out on top.

The problem is not that these young farmers are asking for too much money—they are asking for too little. A beginning farmer might need $10,000 to start a community-supported agriculture program, for instance, in which a few dozen shareholders receive a portion of a small farm’s harvest each week. “In many instances, the local FSA [Farm Service Agency] offices would turn them down,” says Lindsey Lusher Shute, director of the NYFC, “because there was such a huge burden of putting together the paperwork for that amount of money.”

But soon that could change. Yesterday, the USDA announced that it's working towards the creation of a new microloan program that would hand out loans for less than $35,000. Applicants can use “simplified and streamlined procedures,” which means less paperwork for young farmers to wade through and less paperwork for the USDA to process. It’s exactly the sort of program that groups like the NYFC have been asking the USDA to put into place.

“This is very much at the top of our list,” Lusher Shute says. “It's making an appropriate loan size and application for a new farmer who doesn't want to be in debt for hundreds of thousands, because they don't have a business to back it up.”

The program’s not specifically tailored for beginning or young farmers, though. The USDA’s notice about the programs say it’s meant to meet the needs of “very small family farm operations.” But those are the types of farms that new farmers, dedicated to organic agriculture, tend to be creating—at least for the moment—and Agriculture Secretary Tom Vilsack praised “a new vibrancy across the countryside as younger people...pursue livelihoods in farming, raising food for local consumption” in the department’s announcement of the microloan program. The NYFC is going to be watching to make sure that young farmers who’ve been gaining experience by apprenticing on established farms qualify for the program. But right now, it feels like their work to reform these farm loan programs is paying off.